Medicare Liability Settlement

The Medicare Secondary Payer Act at 42 U.S.C. 1395y(b) (the "MSP") clearly states that "Medicare shall be secondary to Workers' Compensation and other insurance, including no fault and liability insurance." Payment "may not be made under Medicare for covered items or services to the extent that payment has been made or can reasonably be expected to be made under a liability insurance policy plan." Aside from this, however, there is little guidance indicating what steps should be taken to comply with the statutes when settling a liability case that involves compensation for future health care where such care would otherwise be covered by Medicare.

CMS does not currently mandate a specific mechanism to protect their interests in liability cases. Further, neither the statute, administrative guidance nor case law specifically direct what the standard of care should be in complying with the parts of the statute that don't yet have administrative guidance. Consequently, it is up to the parties to determine how to comply with the MSP which is daunting and can be fraught with untold risk.

Generally when there is a lack of clarification about the standard of care in the law, the conservative default is a reasonableness standard. We strongly suggest that until such time as there is specific guidance, attorneys, claims adjusters and claimants examine the individual facts of their case to determine what action or set of actions would reasonably protect Medicare's interest in order to comply with the MSP. There are a number of options that might be reasonable based on the case facts ranging from doing nothing to obtaining a full scale Medicare Set Aside ("MSA"). When choosing an option, the parties should consider the medical complexity of the case and the risk factors involved.

The first step is to determine if the MSP applies to your client. Have they paid into the Social Security system and are they eligible for benefits? Are they going to become Medicare eligible in the near future? Have they applied for Social Security Disability insurance? If the answers are no, the MSP does not apply to your case.

In consideration of Medicare's future interest you must decide if, in fact, future care is anticipated. Persons can have a really serious injury and require an extended hospitalization with huge initial medical expenditures, but they may go on to heal and not require further treatment. Orthopedic injuries are a good example of this. If no treatment has been rendered recently and the person is stable, you may choose to get a letter from the treating physician stating that "No future care is anticipated related to the accident".[1] The letter doesn't have to be submitted to CMS; rather you simply append it to your file and close your file knowing you have protected Medicare's future interests. Of course don't forget to resolve any outstanding Medicare liens!

Say your recovery is fairly low (less than $250,000) and future care is anticipated but minimal like with the stable patient who sees their physician 4 times a year to get prescription medications but otherwise has attained maximum medical improvement. In cases like this, education, awareness and an informal set aside is an advisable route. Providio's Medicare and Settlement Guidebook is a book that explains the history and government expectations of the MSP statutes in easily understood language. The book assists in remaining compliant with the MSP through utilization of instructions on how to establish an informal set aside amount which can be created and managed through an online self-administration tool at no additional cost. Your injured client will be armed to follow directions to assist in delineating future care needs and costs associated with the accident; elect to establish an MSA account using their informal calculations; and properly maintain records to be used for reporting and/or exhaustion of the account.

For more medically complex cases and/or cases with a larger settlement value, an MSA analysis is a more conservative approach to protecting Medicare's interest as well as the client's Medicare/Social Security benefits. An MSA is a determination of future medical costs associated with the accident. It involves review of medical records by a certified allocator (typically nurses) to predict all future care of the type Medicare covers. Projections are based on the condition of the injured person, the type of care required to date, the person's rated age life expectancy and normal anticipated follow-up for such conditions. Efforts are made to keep the MSA total as conservative as possible.

For more medically complex cases and/or cases with a larger settlement value, a life care plan ("LCP") may also be utilized to determine future care costs associated with the accident with the caveat that this approach is only for liability cases that do not include a Workers' Compensation component. That said, it typically is not advisable to employ an LCP itself to delineate future care costs as the LCP will undoubtedly include items that Medicare does not cover such as home modification, attendant care etc. However, an LCP can be converted into an MSA where those items that are not covered by Medicare are removed, and costing is done in accordance with MSA standards. In determining whether to use an MSA or an LCP-to-MSA conversion, one must consider the pros/cons. On the positive side, an LCP-to-MSA conversion is less expensive than an MSA where an LCP has already been procured in the case for other reasons. Consequently, if the LCP is conservative and captures just the medical needs of the injured person accurately, then the LCP-to-MSA conversion is your best option. On the negative side, if the LCP was written to maximize recovery and contains items not actually demonstrated in medical records, utilization of an LCP-to-MSA conversion may result in over funding of the resulting MSA. Also if the injured person's condition improved and/or treatment changes occurred since the development of the LCP, those changes will not be reflected in the LCP-to-MSA conversion.

To recap, there are several options to assist in resolving your case where future care needs of the type Medicare provides are anticipated and the claimant is expected to be Medicare eligible. Which option one chooses, is dependent on the facts of the case. While there is no specific guidance at this time, it is strongly advised to employ a reasonableness standard in every case by looking at the facts of the case in light of the options for MSP compliance. Even if you elect to do nothing, you should document to the file your reasoning for such so that you have a paper trail to support your findings. One of the best ways to do that is to contact Providio for a free case consultation with one of our experts. There is no obligation to work with Providio beyond the free case consultation and it will enable you and your client to make informed decisions for how to comply with the MSP until we have clearer guidance from the Centers for Medicare/Medicaid Services.